Is Refinancing Worth the Cost?

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Ever hear the old rule of thumb that states you should only refinance if the new interest rate is at least two points under your current one? Maybe that was sound advice several years ago, but since refinance costs have been getting lower, it may be time to take a serious look. A refinance may be worth its cost several times over, factoring in the benefits that come, along with a lower interest rate.

Benefits

When you refinance, you could be able to lower your interest rate and monthly payment amount, perhaps by a lot. Additionally, you could have the option of tapping into the equity in your house by "cashing out" some funds to remodel your home, consolidate debt, or take your family on a vacation. With lower interest rates, you may also get the chance to build up home equity faster by changing to a shorter term mortgage.

The Cost

All these benefits do cost something, though. With your refinance, you are paying for many of the same things you were charged for at the time you obtained your original mortgage loan. These might include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and others.

Doing the Math

You might offer to pay discount points (prepaid interest) to get a more favorable rate of interest. Your savings over the life of the mortgage loan may be substantial if you've paid up front about three percent of the new loan balance. You may hear that the points can be deducted on your income taxes, but as tax regulations can be difficult to keep up with, please speak with your tax professional before considering this in your calculations.

Another thing about taxes is that if you reduce your interest rate, of course you will also be lowering the paid interest amount that you'll be able to deduct on your taxes. This is one more expense that borrowers consider. We can help you do the math! Call us at 702-524-1376.

Most people find that the savings per month quickly balance out the initial expenses of refinancing. We will work with you to determine what loan program is right for you, considering your cash on hand, how likely you are to sell your home in the near future, and the effect refinancing might have on your taxes. Call us at 702-524-1376 to get started.

Want to know more about refinancing? Give us a call at 702-524-1376.

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